Avon Products Foundation, Inc. Financial Statements. December 31, 2011 and 2010

Transcription

1 Financial Statements

2 Financial Statements December 31, 2011 Table of Contents Independent Auditors' Report 1 Page Financial Statements Statements of Financial Position 2 Statements of Activities 3 Statements of Functional Expenses 4 Statements of Cash Flows 5 Notes to Financial Statements 6-13

3 Independent Auditors' Report The Board of Directors Avon Products Foundation, Inc. We have audited the accompanying statement of financial position of Avon Products Foundation, Inc. (the Foundation ) as of December 31, 2011, and the related statements of activities, functional expenses and cash flows for the year then ended. These financial statements are the responsibility of the Foundation's management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information has been derived from the Foundation s 2010 financial statements and, in our report dated April 1, 2011 we expressed an unqualified opinion on those financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Foundation's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Avon Products Foundation, Inc. as of December 31, 2011, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. New York, New York April 17, Mamaroneck Avenue, Harrison, NY Tel: Fax:

4 Statements of Financial Position December 31, 2011 (with comparative amounts at December 31, 2010) ASSETS Cash and cash equivalents $ 36,559,046 $ 47,071,277 Investments 4,225, ,000 Pledges receivable, net of allowance for uncollectible pledges of $30,144 and $34,824 1,959, ,914 Other receivables 631, ,689 Prepaid expenses 226, ,020 Due from Avon Products, Inc. 446,631 1,491,670 Deferred program costs 1,695, ,002 Equipment, net of accumulated depreciation of $37, ,200 - $ 45,855,073 $ 50,799,572 LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued expenses $ 983,316 $ 572,903 Due to Avon Products, Inc. 143, ,841 Grants payable, net 15,249,663 13,291,038 Total Liabilities 16,376,922 14,119,782 Net Assets Unrestricted 24,255,359 33,436,939 Temporarily restricted 5,222,792 3,242,851 Total Net Assets 29,478,151 36,679,790 $ 45,855,073 $ 50,799,572 See notes to financial statements 2

5 Statements of Activities Year Ended December 31, 2011 (with summarized totals for the year ended December 31, 2010) Temporarily Unrestricted Restricted Total Total PUBLIC SUPPORT AND REVENUE Special events income $ 1,494,940 $ 40,514,200 $ 42,009,140 $ 51,738,071 Special event in-kind donations 518, , ,331 Contributions from Avon Special Events 4,534, ,000 4,784,000 4,659,000 Breast Cancer Crusade - 4,678,311 4,678,311 11,452,298 Scholarship / Other Programs - 1,240,000 1,240,000 1,265,000 Domestic Violence / Empowerment - 3,681,988 3,681,988 4,137,821 Emergency Relief Fund ,068,229 General support - donation 350, , ,000 General support - in-kind 2,031,620-2,031,620 1,992,840 Contributions from others 1,516,718 1,970,015 3,486, ,341 Pledges - 1,356,840 1,356,840 1,342,767 Investment income 104, , ,866 Net Assets Released from Restrictions: Satisfaction of purpose restriction 50,887,121 (50,887,121) - - Satisfaction of time restriction 1,342,767 (1,342,767) - - Total Public Support and Revenue 62,262,068 1,979,941 64,242,009 80,181,564 EXPENSES Program Services Breast Cancer Crusade 46,946,353, - 46,946,353, 46,285,056, Scholarship / Other Programs 1,442,765-1,442,765 1,527,261 Domestic Violence / Empowerment 4,536,546-4,536,546 6,100,511 Emergency Relief Fund 10,000-10,000 2,108,458 Total Program Expenses 52,935,664-52,935,664 56,021,286 Supporting Services Management and general 1,931,490-1,931,490 2,206,517 Fundraising 16,576,494-16,576,494 15,968,230 Total Supporting Services 18,507,984-18,507,984 18,174,747 Total Expenses 71,443,648-71,443,648 74,196,033 Change in Net Assets (9,181,580) 1,979,941 (7,201,639) 5,985,531 NET ASSETS Beginning of year 33,436,939 3,242,851 36,679,790 30,694,259 End of year $ 24,255,359 $ 5,222,792 $ 29,478,151 $ 36,679,790 See notes to financial statements 3

6 Statements of Functional Expense Year Ended December 31, 2011 (with summarized totals for the year ended December 31, 2010) Program Services Supporting Services Breast Scholarship/ Domestic Emergency Management Cancer Other Violence/ Relief and Total Crusade Programs Empowerment Fund Total General Fundraising Total EXPENSES Staffing $ 217,099 $ - $ 56,228 $ - $ 273,327 $ 653,507 $ 47,144 $ 700,651 $ 973,978 $ 817,454 Grants 33,900,540 1,252,217 3,746,391 10,000 38,909, ,909,148 43,608,341 Equipment 8, ,567-1,704,357 1,704,357 1,712,924 1,643,694 Communications ,835 1,071,359 1,075,194 1,075,194 1,088,309 Travel and meals 230, ,468 28, , , , ,715 Supplies 379, ,851 6, , , , ,552 Facilities , , , ,835 Public awareness 7,112, ,112,855-3,196,543 3,196,543 10,309,398 7,761,849 Public relations 147, ,269 1,000 47,020 48, , ,796 Printing 2,754,890-79,869-2,834,759 12, , ,991 3,258,750 3,121,257 Professional services 482,458-6, , ,647 5,430,500 5,564,147 6,052,682 6,287,381 Other services 992, ,168-2,201,753 2,201,753 3,193,921 3,592,164 Insurance ,611 53,128 88,739 88,739 89,717 Taxes and licenses , , , , ,845 Bank fees , , ,498 1,011,289 Agency labor ,746-66,746 66, ,890 Bad debt expense ,094-26,094 26,094 26,774 Depreciation expense ,400 37,400 37,400 - Total Direct Expenses 46,226,165 1,252,217 3,888,565 10,000 51,376,947 1,829,447 15,687,159 17,516,606 68,893,553 71,835,862 Staffing 524, , ,624-1,209,169 84, , ,174 1,605,343 1,663,233 Communications 26,469 4,606 16,112-47,187 2,301 8,056 10,357 57,544 - Travel and meals 36,614 6,368 22,287-65,269 3,184 11,143 14,327 79,596 70,411 Supplies 13,594 2,364 8,274-24,232 1, , , , ,737 Facilities 38,037 6,615 23,153-67,805 3,308 11,577 14,885 82,690 82,690 Public awareness ,500 32,500 32, ,959 Public relations 35,251 6,131 21,458-62,840 3,065 10,728 13,793 76,633 70,726 Other services 7,078 1,231 4,308-12, , , ,198 3,800 Agency labor 39,043 6,790 23,765-69,598 3,395 11,883 15,278 84,876 39,615 Total In-Kind Expenses 720, , ,981-1,558, , , ,378 2,550,095 2,360,171 Total Expenses $ 46,946,353 $ 1,442,765 $ 4,536,546 $ 10,000 $ 52,935,664 $ 1,931,490 $ 16,576,494 $ 18,507,984 $ 71,443,648 $ 74,196,033 See notes to financial statements 4

7 Statements of Cash Flows Year Ended December 31, 2011 (with comparative amounts for the year ended December 31, 2010) CASH FLOW FROM OPERATING ACTIVITIES Change in net assets $ (7,201,639) $ 5,985,531 Adjustments to reconcile change in net assets to net cash from operating activities Bad debt expense 26,094 26,774 Depreciation expense 37,400 - Net changes in operating assets and liabilities Pledges receivable, net (1,752,616) 80,066 Other receivable (421,996) (813) Prepaid expense (33,984) (1,220) Due from Avon Products, Inc. 1,045,039 (777,261) Deferred costs (840,069) 5,341,856 Accounts payable and accrued expenses 410,413 56,511 Due to Avon Products, Inc. (111,898) 48,292 Grants payable, net 1,958,625 2,913,063 Net Cash from Operating Activities (6,884,631) 13,672,799 CASH FLOW FROM INVESTING ACTIVITIES Proceeds from sale of investments - 5,353,000 Purchase of equipment (149,600) - Purchase of investments (3,478,000) (1,470,000) Net Cash from Investing Activities (3,627,600) 3,883,000 Net Change in Cash and Cash Equivalents (10,512,231) 17,555,799 CASH AND CASH EQUIVALENTS Beginning of year 47,071,277 29,515,478 End of year $ 36,559,046 $ 47,071,277 See notes to financial statements 5

8 Notes to Financial Statements 1. Organization Avon Products Foundation, Inc. (the "Foundation") was incorporated in the State of New York in 1955 by Avon Products, Inc. ( Avon ). The mission of the Foundation is to improve the lives of women and to bring this mission to life through two key philanthropic pillars: breast cancer and domestic violence. The Foundation also manages certain other programs including scholarships, associate matching gifts and special emergency relief funds for Avon Products, Inc. Programs The major program activities of the Foundation are as follows: a. Breast Cancer The Avon Breast Cancer Crusade funds breast cancer awareness, education, outreach programs, medical research and programs that assist people diagnosed with breast cancer, particularly the underserved, with services to improve their access to clinical care. The Foundation receives financial support from Avon Products, Inc. from special product sales and direct donations and from the general public through the Avon Walk for Breast Cancer ( AWBC ), other special events and donations. b. Domestic Violence In July 2004, the Foundation launched the Speak Out Against Domestic Violence program, which significantly expanded its domestic violence program. Grants support awareness and education, prevention and victim assistance programs. The Foundation receives financial support from Avon Products Inc. from special product sales and direct donations and from the general public through the Walk the Course Against Domestic Violence, other special events and donations. c. Other Programs Scholarships The Foundation manages U.S. college scholarship programs for children of Avon associates, Avon independent sales representatives, children and grandchildren of Avon independent sales representatives, and for children residing in and around the Suffern New York school district. It also manages a global scholarship program for the children of Avon Sales Representatives. Matching Gifts The Foundation manages a program that matches specified charitable donations for Avon in the U.S. 6

9 1. Organization (Continued) d. Emergency Relief Funds Avon Products Foundation, Inc. Notes To Financial Statements Through donations from Avon and the sale of selected Avon Products from time to time, the Foundation provides support in emergency and crisis situations, such as the following: Haiti Relief Efforts Avon Products made a $1 million donation to the Foundation to assist in relief efforts following the devastating earthquake in Haiti on January 12, The Foundation provided $500,000 to the American Red Cross International Response Fund for Haiti Relief and $500,000 to Doctors Without Borders for their life-saving work in Haiti. Avon Sales Representatives raised an additional $1,068,473 by selling Skin So Soft products from which Avon donated 50 cents per product sold. Avon Representatives and customers donated an additional $41,344 directly to the Avon Foundation for Haiti relief. As a result of the new funds the Foundation made four grants to organizations addressing the issues of violence against women, improving access to breast cancer treatments and the rehabilitation of earthquake victims. Other Examples of Avon Emergency Relief Support Following the 2008 earthquake in Sichuan Province, Avon and the Foundation supported reconstruction and relief efforts. In response to the Tsunami tragedy in Asia, the Foundation created the Heart of Asia Relief Fund in late 2004 that assisted with relief and recovery. In the aftermath of the September 11, 2001 tragedies, the Foundation created the Avon Foundation Heart of America Charity, which made grants for the benefit of the children affected by those events. In 2005 in response to the devastation of Hurricanes Katrina and Rita, the Heart of America campaign was renewed with the sale of a special keychain to support recovery and rebuilding. e. Special Contribution In honor of the 125th Anniversary of the founding of Avon Products, Avon Chairman and CEO Andrea Jung made a generous personal contribution in the amount of $2,756,000 to the Avon Foundation in 2011 that will support: Global expansion of a scholarship program for the Children of Avon Representatives. Creation of a global volunteer program for Avon associates to improve the lives of women. Launch of a Global Breast Cancer Clinical Scholars specialty study program. Expansion of the Avon Believe Fund to support domestic violence shelters globally. 7

10 Notes To Financial Statements 2. Summary of Significant Accounting Policies Basis of Presentation The financial statement presentation is in conformity with accounting principles generally accepted in the United States of America for nonprofit organizations, which requires the Foundation to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted net assets. There are no permanently restricted net assets as of December 31, Functional Allocation of Expenses The costs of providing the various programs and supporting services have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services in reasonable ratios determined by management. Cash and Cash Equivalents The Foundation considers all highly liquid debt instruments with a maturity of three months or less at the time of purchase, excluding certificates of deposit, to be cash equivalents. Allowance for Uncollectable Receivables An allowance for uncollectable receivables is estimated based on a combination of writeoff history, aging analysis and any specific known troubled accounts. Fair Value of Financial Instruments The Foundation follows the fair value measurement and disclosure provisions of the Financial Accounting Standards Board ( FASB ) which established a fair value hierarchy organized into three levels based upon the input assumptions used in pricing assets. Level 1 inputs have the highest reliability and are related to assets with quoted prices in active markets. Money market mutual funds included in cash equivalents are valued using level 1 inputs (see Note 4). Investments and Investment Income Investments consist of certificates of deposit valued at cost plus accrued interest which approximates fair value. Income or losses from investments, including both realized and unrealized gains and losses, are treated as an increase or decrease in unrestricted net assets unless otherwise specified by the donor. 8

11 Notes To Financial Statements 2. Summary of Significant Accounting Policies (Continued) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Grants Grants are recorded when a commitment is made and approved by the Board of Directors. Multi-year grants are recorded at present value using a risk adjusted interest rate, which generally approximates the rate of the two year Treasury bill plus 150 basis points. Public Awareness Public awareness and education costs consisted primarily of television, radio, and directmail communications, local and national print and point-of-sale materials, and educational pamphlets, interactive, electronic and digital materials. The Foundation expensed public awareness costs as incurred. During the year ended December 31, 2011, public awareness expense was $10,341,898. Tax Status The Foundation is a public charity and is exempt from Federal income taxes pursuant to Section 501 (c) (3) of the Internal Revenue Code. The Foundation recognizes the effects of income tax positions only when they are more likely than not of being sustained. Management has determined that the Foundation has no uncertain tax positions that would require financial statement recognition or disclosure. The Foundation is no longer subject to examinations by the applicable taxing jurisdictions for periods prior to Subsequent Events Evaluation by Management Management has evaluated subsequent events for disclosure and/or recognition in the financial statements through the date that the financial statements were available to be issued, which date is April 17, Comparative Data The financial statements include prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Foundation s financial statements for the year ended December 31, 2010 from which the summarized information was derived. 9

12 Notes To Financial Statements 4. Concentration Risk Financial instruments that potentially subject the Foundation to concentration of credit risk consist principally of cash and cash equivalents and investments. The Foundation maintains its cash in bank deposit accounts which, at times, may exceed Federally insured limits. Cash equivalents consist of investments in money market mutual funds held with two money managers the balance of which was $36,165,000 at December 31, The Foundation monitors this risk on a regular basis. Investments consist of brokered certificates of deposit, all of which were less than federally insured limits. The Foundation has not experienced any losses in such accounts. 5. Other Related Party Transactions Contributions Avon made a pledge of $16,765,919 to the Foundation in The Foundation received $16,319,288 of this amount during the year. The balance of $446,631 is reflected as a receivable at December 31, This receivable was subsequently collected in The Foundation under an administrative services arrangement has outstanding obligations to Avon for expenses of the finance and operations department and other management services amounting to $143,943 as of December 31, In-Kind Contributions Avon provides the Foundation with a substantial amount of support including the following: Staffing $ 1,605,343 Travel & Meals 79,596 Supplies 29,549 Facilities 82,690 Telephone 57,544 Public Relations 76,632 Agency Labor 84,876 Other 15,390 $ 2,031,620 The support of $2,031,620 is reflected in the financial statements as contributions and expenses for the year ended December 31, The Foundation also received valuable voluntary management support from the Board of Directors and numerous associates of Avon Products, Inc. which do not meet the requirements for measurement and recognition in the financial statements. 10

13 Notes To Financial Statements 6. Special Events One awareness and fundraising program in 2011 was the Avon Walk for Breast Cancer ( AWBC ) comprised of nine weekend awareness and fundraising walks in the United States. Other fundraising programs in 2011 included the Foundation Awards Gala and Walk the Course Against Domestic Violence event. In 2011, all special events provided the Foundation with total income of $48,654,382, of which $43,351,907 was from the public (including $1,342,767 of 2011 special events income pledged in 2010), $518,475 was from in-kind donations from sponsors and $4,784,000 was from Avon. 7. Joint Costs The Foundation conducted activities that included direct-mail campaigns and special events. The costs of conducting those activities included a total of $16,757,077 of joint costs. These joint costs were allocated as follows: 8. Contributions Receivable, net Breast Cancer Crusade $ 11,798,701 Scholarships/Other Programs 190,545 Domestic Violence 647,982 Emergency Relief Fund 0 Management and General 102,043 Fundraising 4,017,806 Total $ 16,757,077 Receivables, which include regular and special contributions at December 31, 2011, discounted to fair value using daily treasury yield curve rates of 0.36% plus 150 basis points totaling 1.86% at December 31, 2011, are summarized as follows: 9. Equipment 2012 $ 1,260, ,000 2,016,938 Less Discount to present value (27,358) Less Allowance for doubtful accounts (30,144) $ 1,959,436 Equipment consists of tents purchased for AWBC. Depreciation is provided by the straight-line method over an estimated life of four years. 11

14 Notes To Financial Statements 10. Leases The Foundation has various lease agreements with unrelated parties for certain administrative office space. Rent expense for the year ended December 31, 2011 and 2010 was $423,427 and $416,867. Minimum future lease payments to be made for each of the years in the period ended December 31, are as follows: 11. Grants Payable 2012 $ 387, , , ,600 The Foundation has entered into longer-term commitments with certain grant beneficiaries. Payments to these organizations at December 31, 2011 are due to be made as follows: Less than one year $ 14,940,423 One to four years 315,000 15,255,423 Less Present value discount (5,760) Grants Payable, net $ 15,249, Temporarily Restricted Net Assets Temporarily restricted net assets are available as follows at December 31, 2011: Time Restriction Breast Cancer Crusade $1,356,840 Global Initiatives 1,728,642 Purpose Restriction Domestic Violence 1,223,815 Scholarships/Other Programs 913,495 $ 5,222,792 The Breast Cancer Crusade time restriction relates to contributions received and pledges made towards the 2012 events received in 2011 and the Global Initiatives time restriction relates to the future payments to be received from the special contribution made by the CEO. 13. Deferred Program Costs Expenses related to the 2012 events have been reflected as deferred program costs at December 31,

15 Notes To Financial Statements 14. Tuition Commitments The Foundation sponsors multiyear scholarship programs for children of Avon associates and for children residing in and around the Suffern New York school district. The Foundation intends to provide continuing support for selected participating students until completion of their college education, contingent upon fulfilling certain requirements of the award. The anticipated future tuition cost for those students to complete their studies over a four-year period is approximately $208,500. The Foundation intends to obtain the necessary funds to support the participating students through future grants from Avon Products, Inc. The Scholarship program is administered by the Educational Testing Service and Scholarship America. No accrual has been made for these costs as they are not unconditional. * * * * * 13